FOX Business: The Power to Prosper
The blue chips on Thursday erased virtually all of an early seloff that was triggered by fears China’s economy is overheating, but tumbling network equipment stocks fueled the Nasdaq Composite’s second-straight slide.
The Dow Jones Industrial Average slipped 2.49 points, or 0.02%, to 11822.80, the Standard & Poor's 500 declined 1.66 points, or 0.13%, to 1280.26 and the Nasdaq Composite lost 21.07 points, or 0.77%, to 2704.29. The FOX 50 gained 0.35 points, or 0.04%, to 918.04.
The session marked a repeat of sorts from Wednesday as the Dow ended just fractionally lower, but the previously red-hot Nasdaq Composite continues to cool off amid deteriorating tech stocks. The culprit for the latest slide was a 21% plunge for network equipment maker F5 Networks (NASDAQ:FFIV) and heavy losses for tech stocks like Amazon.com (NASDAQ:AMZN).
Much of the focus was on China, where another surge in gross domestic product renewed fears the country will need to hike interest rates, sparking a wave of selling in basic materials and energy stocks like Rio Tinto (NYSE:RIO) and BP (NYSE:BP).
Still, considering the heavy overseas selling amid the Chinese concerns, the bounce off the lows is “a pretty impressive move,” said Michael James, managing director of equity trading at Wedbush Securities. “It give some confidence to the bulls that maybe we’ll be able to make it through earnings season without giving up too much of the gains of the last few months.”
Most of the Dow's 30 stocks ticked lower, led by economically-sensitive Caterpillar (NYSE:CAT) and DuPont (NYSE:DD). The index's best performers were Home Depot (NYSE:HD) and JPMorgan Chase (NYSE:JPM).
Driven lower by tech stocks such as Apple (NASDAQ:AAPL) and Seagate Technologies (NASDAQ:STX), the Nasdaq declined nearly 1%.
The risk aversion on Wall Street comes after the markets suffered a rare setback on Wednesday as the Nasdaq suffered its biggest percentage drop since November 23 -- and the Dow backed away from two-year highs.
“This is a technical pullback. You had a tremendous run since September. You couldn’t ask for a better four or five-month run,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. "You’re overdue for a pullback, not that it needs to be severe.”
Global markets tumbled in part due to concerns China's fourth-quarter GDP growth of 9.8% could trigger further interest rate hikes there. Economists had been expecting a rise of 9.2%. However, consumer prices climbed 4.6% in December, easing back from November's 5.1% rise. Asian markets retreated on the fears, highlighted by a near-3% plunge for China's Shanghai Composite.
Wall Street remains jittery about signs China will do anything to curb its growth because that can have ripple effects around the globe and eat into China's voracious demand for commodities.
“They don’t want it to overheat. They want it to be sustainable. It’s a logical conclusion the next step will be toward higher rates,” said Pado. “If they were to slow the pace of their growth, it would obviously cut back on orders of raw materials, which have been on a skyrocket run here.”
Underscoring those concerns, economically-sensitive copper took its biggest slide since mid-November, plunging 2.24% a pound to $4.2625. Crude oil dove $2.00 a barrel, or 2.20%, to $88.86. Gold slid $23.70 a troy ounce, or 1.73%, to $1,346.50.
Tech stocks took another tumble as F5 Networks lost more than one-fifth of its value after issuing a gloomy revenue forecast of $275 million to $280 million that would trail the Street's view. That guidance dragged down rival network equipment, including Cisco Systems (NASDAQ:CSCO), Riverbed (NASDAQ:RVBD) and BlueCoat Systems (NASDAQ:BCSI).
On the domestic economic front, Wall Street struggled to rally around the latest job figures. The Labor Department said initial jobless claims declined by 37,000 last week to 404,000, surpassing forecasts from analysts for a drop of 25,000. The tumble in claims comes after an unexpected surge in the prior week that may have been influenced by seasonal factors. Continuing claims slid by 26,000 to 3.86 million.
Housing stocks such as Toll Brothers (NYSE:TOL) and Lowe's (NYSE:LOW) rallied as the National Association of Realtors said existing home sales jumped by a stronger-than-expected 12.3% in December to a rate of 5.28 million units. Despite that encouraging performance, 2010 sales slid 4.8%, marking the worst year since 1997.
The Philadelphia Federal Reserve said its regional manufacturing index slid to 19.3 in January, down from 20.8 in December and just shy of the 19.5 economists had called for. The prices paid index, a measure of inflation, jumped to 54.3, up from 47.9 the month before.
After the closing bell, tech behemoth Google (NASDAQ:GOOG) and Capital One Financial (NYSE:COF) are set to step up to the earnings stage.
Morgan Stanley (NYSE:MS) rallied 4% after revealing a stronger-than-expected adjusted profit of 43 cents a share on $7.8 billion in revenue. Analysts had called for EPS of just 35 cents on $7.35 billion in revenue.
Washington Post Co. (NYSE:WPO) said legendary investor Warren Buffett will step down from the media company’s board of directors after more than 30 years. However, Buffett told FOX Business he will keep his stake in the Washington Post Co. and will no longer sit on any other boards other than that of Berkshire Hathaway, his holding company.
EBay (NASDAQ:EBAY) jumped 5% after beating the Street with a non-GAAP profit of 52 cents and met expectations with a 5% rise in sales to $2.5 billion. The online auction site also issued a bullish outlook for the new year and in-line guidance for the current quarter.
PNC Financial (NYSE:PNC) slumped even after surpassing estimates with a non-GAAP profit of $1.60 a share, well ahead of the $1.38 analysts had called for. Its revenue of $3.9 billion also topped expectations.
Wendy's/Arby's Group (NYSE:WEN) leaped 7% after revealing plans to auction off its Arby's sandwich chain so it can focus on its Wendy's brand. Arby's, which accounts for roughly 30% of the company's revenue, posted a 3.1% rise in same-store sales last quarter.
Hewlett-Packard (NYSE:HPQ) is considering replacing four of its directors in an effort to remove directors loyal to ex-CEO Mark Hurd, Bloomberg News reported. Hurd was canned by the board in a controversial move last year amid an ethics scandal.
Boeing (NYSE:BA) announced plans to slash 1,100 workers from its C-17 cargo plane line, representing about 24% of its total employees in that unit. The move will primarily impact 900 workers at its Long Beach, Calif. plant.
Union Pacific’s (NYSE:UNP) fourth-quarter profits soared 41% to $1.56 a share, 8 cents higher than analysts had predicted. Revenue jumped 17% to $4.4 billion, slightly exceeding the Street’s view of $4.35 billion. Business volumes climbed 9% and operating margin grew to 29.8% from 26.6%.
UnitedHealth (NYSE:UNH) beat the Street with a 10% rise in profits to 94 cents a share, surpassing the 84 cents analysts had called for. Revenue also climbed by 10% to $24.03 billion, narrowly topping estimates. The company also backed its 2011 EPS view of $3.50 to $3.70.
Freeport-McMoRan's (NYSE:FCX) fourth-quarter profits soared 60% to $3.25 a share, easily beating forecasts for $3.03. Revenue jumped 22% to $5.6 billion, compared with estimates for $5.47 billion.
Southwest Airlines (NYSE:LUV) posted a 13% rise in fourth-quarter profits and an in-line non-GAAP profit of 15 cents a share. The discount carrier's revenue climbed by a stronger-than-expected 14.8%. Oil costs soared 15%, contributing to a 14% rise in total expenses.
The U.K.'s FTSE 100 dove 1.82% to 5867.91, Germany's DAX declined 0.83% to 7024.27 and France's CAC 40 lost 0.30% to 3964.84.
In Asia, Japan's Nikkei 225 dropped 1.13% to 10437.30, Hong Kong's Hang Seng tumbled 1.7% to 24003.70 and China's Shanghai Composite plunged 2.92% to 2677.65.